New Delhi: Online advertising is set to grow 30-40% this fiscal year, with early adopters of the medium increasing their expenditure and new converts adding to their ranks.

Photo: Bloomberg.

India has more than 100 million people who use the Internet, around half of which also shop online, according to Google India. There are 22 million subscribers of the social networking website Facebook, according to a 2010 report by Vizisense, which covers the digital media space.

The digital media market, including the Internet, social media and e-commerce, is expected to be worth ₹ 1,500 crore this year, said Manish Vij, founder of the digital agency Tyroo Media Private Ltd.

The current size of the market, according to the Internet and Mobile Association of India (IAMAI), is ₹ 1,100 crore, while the total advertising market is estimated at ₹ 25,000 crore.

Nitin Chowdhary, business head at digital agency Tyroo Media, said, “Retail brands will be the game changer in the online space." He said Tyroo is doing online work for retailer Shoppers Stop.

Banking and financial services and online classifieds were early movers, while sectors such as real estate, education and e-commerce are getting in now, said Nitin Mathur, senior director (marketing) at Yahoo! India.

Max Hegerman, senior vice-president and digital head at JWT India, the advertising agency for Bharti Airtel Ltd, said telecom companies have the biggest digital advertising budgets, with 10% of their total budget spent online. “With the advent of 3G (third generation mobile communication), it is in their best interest to be online and promote themselves," he said.

Hegerman said his client list has been growing in the two years he has headed JWT’s digital media space. “The shift is gradual but across the board. Companies spend 5-8% of their marketing budgets online nowadays compared to 3% earlier."

C.V.L. Srinivas, managing director at Starcom Mediavest, said telcos and car makers spend 15-20% of their total budgets online.

Anuradha Agarwal, vice-president (sales and marketing) at Vodafone Essar Ltd, declined to share the company’s digital budget but said it had jumped from 5% to 10%.

“Digital space is a great way to build relationships and engage with customers. Besides, the medium is efficient, effective, non-intrusive and saves time," she added. The returns are well defined and Vodafone has an online grievance redressal system, where customers can complain or ask questions, Agarwal added.

“This is our way of connecting with the net savvy, upwardly mobile youth. It is also a cost effective approach to marketing," he said.

When the company launched the Swift model in August, the event was streamed live on Facebook. “We had over 100,000 fans online waiting for the launch," the spokesperson said.

Vij of Tyroo Media said companies are spending more on digital ads as they realise that prospective buyers are spending more time online.

E-commerce brands are also spending more money on digital media. Tyroo’s parent Smile Group operates two shopping portals, Dealsandyou.com and Fashionandyou.com, which spend 40-50% of their advertising budgets online.

Satyajit Sen, chief executive, Zenith Optimedia, the media agency for Honda Siel Cars India Ltd, said television remains the biggest advertising medium. He, however, expects companies to expand the share of digital advertising in their marketing budgets to about 35%.

Srinivas of Starcom Mediavest and Chowdhary of Tyroo said getting consumer goods companies to spend online is the biggest challenge.

“Once they move in, the flood gates for digital will open," Srinivas said.

“Right now we cater to 80-100 million customers," said Vij. “Once we are able to reach a consumer base of 250-300 million, the medium will get established."